ERP systems gain momentum with metals industry

The time is ripe for the metals industry to invest in technology, including enterprise resource planning (ERP) software, according to Tony Barnes, senior staff consultant in the metals practice of Crowe Horwath LLP.

An inaugural ERP in the Metals Industry survey conducted jointly by the Chicago-based accounting and consulting firm and AMM showed that while the metals industry generally has been slow to adopt ERP technology, most companiesÑespecially larger operationsÑalready take advantage of at least some ERP software components.

But a vast majority of companies also are dissatisfied with the ERP systems they are currently using, with a surprisingly large percentage of metal companies opting for custom ERP solutions rather than systems provided by large ERP providers such as SAP AG, Oracle Corp. and Microsoft Corp.

It is our hope that this survey could be used to give metal executives insight into what their peers are doing in regard to ERP, Barnes said. At the same time, it could give direction to some software providers to see what the metals industry is looking for in these systems.

While there has been a lot of metals industry research, including general trends and growth forecasts, up to this point there has been nothing available that points to how technology affects the metals industry and how receptive it is to technologies like ERP, he said.

Calling it the Microsoft Office for the enterprise, Barnes described ERP as a set of enterprise system tools that allow a company to do its work more efficiently, effectively and cost consciously. It could involve everything from sales and marketing to finance, products and operations.

Its biggest advantage is allowing you to have a single view of your business rather than looking at many systems or at multiple documents to know what is going on at every stage of business activity, Barnes said. All of your information, all of your productivity metrics, sales metrics and financial metrics, can be contained in one place and the companys management or executive leadership can then look at that data in a report on a tablet device and see how business is doing in a much more real-time manner. You can see what is happening right now.

To date, the metals industry--including mills, service centers, fabricators and scrap processors--has been slow to adopt ERP, according to Barnes. Some companies use bits and pieces of it, perhaps just for financial information, but many dont use ERP packages to their fullest capabilities.

One problem is that many companies in the metals industry have found that the big ERP packages available cant adequately handle the requirements of their operations so they have sought other methods to track that part of their business, Barnes said. In some cases, companies have brought in information technology (IT) developers and built an ERP system from scratch to support their needs. In fact, a surprisingly high proportion--25 percent--of respondents to the AMM/Crowe Horwath survey said their ERP systems were custom developed.

That is staggering, because in most other industries it isnt nearly that high, Barnes said, noting that this could pose a problem, given that a custom system is supported by only a handful of individuals.

And 74 percent of respondents said they were less than satisfied with their systems, with most systems not supporting their operational and informational needs, Barnes said.

But ERP has definitely evolved over the past five to seven years, and now there are solutions that are much more closely tailored for metal producers, service centers and scrap processors and require less customization and less upfront charges, he said.

The need for business intelligence and better reporting of business activities by and for management and their executive team has become common across most industries, Barnes said. You want to be able to see how your business is doing day to day and week to week. And you want to be able to see the numbers and know that they are accurate and timely. You want to be able to see them wherever you are.

While the AMM/Crowe Horwath survey didnt identify any particular segment of the metals industry that has adopted ERP systems, service centers are probably at the higher end of the spectrum due to their need to closely track inventories and monitor the specifications of that inventory, Barnes said. An ERP system will help them do so.

The survey did indicate that larger companies are more likely to have an ERP system or several kinds of ERP systems that they are leveraging.

Crowe Horwath believes that companies that are readying themselves for the next phase of growth have been more receptive to adopting ERP systems, Barnes said. Those that have been getting out there and taking advantage of the down market to prepare for the future when there is more opportunity for growth have been more receptive to investing in an ERP system than those who are not doing so.

But there is no doubt that it is an investment. It requires an investment on the part of the entire company, Barnes said, noting both the financial investment and that of peoples time.

Because of that, the management team has to buy into it and support it, and encourage leaders of various aspects of the company--sales, production, customer service and finance--to spend time learning the system and setting it up appropriately for the business. If you dont factor in that time, it could be a big surprise. But companies that do so and who make the necessary investment will get a payoff when their workers learn to use the ERP system efficiently and are more effective at doing their jobs, he said.

More companies will try to leverage as much as they can from their ERP systems, Barnes said, but it could be a challenge in this time of increasing merger-and-acquisition activity to consolidate or merge IT or ERP systems. The merged company often will have multiple ERP systems in place and must either integrate them or eliminate one and move to a singular ERP system throughout the company.

Looking forward, ERP systems will evolve similarly to other technologies. ERP systems traditionally have been more desktop focused, with users either sitting at a desk or a computer terminal on the factory floor to input information. But future ERP systems will use more mobile devices, including handheld computers and scanners accessed through mobile phones and tablets.

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